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The Kroger Grocery Empire: Barney’s Blueprint for Success

The history of the Kroger Grocery Company has parallels with the Great Atlantic and Pacific Tea Company, another pioneering powerhouse of American food retailing. Both grocery businesses started in the 19th century as tea and coffee purveyors, however Kroger, unlike A&P Tea, has survived through the centuries and still trades today as lucratively as ever. In the 2016 fiscal year Kroger was the largest supermarket chain by revenue in the US (yielding US$115.34 billion). It shares a roost with Walmart at the top of the US retail tree…it is number 2 general retailer behind Walmart in the US, and is the third largest retailer in the world[1].

Origins, growth and expansion of the Kroger name
The man behind the Kroger Company was Bernard Kroger, better known as ‘Barney’. Kroger, the son of German immigrants, got into the retailing world at the basement level – working door-to-door selling coffee first for the Great Northern and Pacific Tea Co and then the Imperial Tea Co. By 1883 Kroger was in business for himself, his first store traded under the name The Great Western Tea Co…soon renamed Kroger Grocery and Baking Co✳. The Cincinnati-based business expanded exponentially into the 20th century, by the end of the 1920s decade Kroger had over 5,500 stores in the US[2].

The Kroger business ethic
Not afflicted with the curse of Hamlet, Barney Kroger was not one to overthink or complicate matters, as his simple motto attested: “Be particular. Never sell anything you would not want yourself.” Kroger’s business style was heavily and idiosyncratically micro-managerial, the businessman personally maintained an account book which meticulously recorded all the firm’s financial transactions. Kroger’s business credo was “First: Do it first. When seasonable goods come into the market, have the first. When prices go down, be the first to reduce them. Second: Never sell anything except for just what it is, and don’t sell it then if it isn’t good. Third: Advertise as liberally as business income permits. Fourth: sell on a small margin and make the turnover rapid”. The Ohoian entrepreneur’s pragmatism emphasised “duplicating and reduplicating…what works”[3].

One of Barney Kroger’s most enduring contributions to grocery retail revolves around his minimum cost/high volume approach to trading. He is remembered for introducing the template of the low-cost grocery chain, still much duplicated in modern retailing. Kroger was also innovative in his store design, adding distinct bakery, meat and seafood departments in his grocery stores[4].

In-house food manufacturers
Bread-making was a good example of the Kroger cost minimisation strategy…at variance with most grocers in the early 20th century who purchased the product from independent bakeries, Barney Kroger baked his own bread. This way he could further cut the price for customers and still make a profit. Kroger after the death of Barney has rapidly expanded its own product manufacturing facilities, now making thousands of comestibles within the company[5].

A typical mid-century Kroger storeMerger juggernaut
From the 1950s on Kroger embarked on an ongoing series of mergers with smaller firms to consolidate its market position in the US grocery/supermarket trade. The most significant of these, in 1999, was with Fred Meyer, Inc., then the fifth biggest American grocer. This new acquisition by Kroger saw it reach a new high of 2,200 stores in 31 states, netting the supermarket giant billions in annual revenue[6].

Kroger innovations
Kroger has led the way in retail grocery innovations…the innovations pioneered by the company include ‘firsts’ for a grocery chain, eg, the routine monitoring of product quality and the scientific testing of foods; testing of electronic scanners. As well Kroger was a pioneer in modern consumer research in grocery lines[7].

Kroger’s position today as a market leader in the US grocery and supermarket field (FN1) rests firmly on the solid foundations laid down by its founder Barney Kroger. Contemporary growth by the company has continued a trajectory of diversification well beyond the grocery staple into fuel centres, florists, drug and convenience stores.

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✳ eventually the company name was shortened simply to Kroger